UK needs aggressive manufacturing strategy to bring northern regions in line with London

Bernard Ginns, Business Editor

GLOBAL ACCOUNTANCY giant EY has urged the Government to develop a more aggressive manufacturing strategy to help close the growing economic divide between Yorkshire and London.

The Big Four firm called for more resources to back reshoring, support for developing and retaining technology skills outside of the South East and a more joined-up approach to trade as a national response to speed up regional development.

EY made the comments in its first UK region and city economic forecast, which uses much of the same methodology as the respected ITEM Club think tank.

It forecasts that Yorkshire’s economy will grow by an average of 1.9 per cent a year in gross value added terms between 2015 and 2018, lagging the UK average of 2.3 per cent and left in the wake of London’s 3 per cent.

EY predicts that Leeds will be the second-fasting city growing outside the South over the coming years as a result of its focus on higher value service-based industries.

It also forecasts that the Chancellor’s vision of a Northern Powerhouse will have limited impact in the short term and will only start to be felt after 2020.

In an interview with The Yorkshire Post, EY chief economist Mark Gregory questioned the Government approach of facilitating growth through the devolution of power to the regions.

He said: “We need more than that, we need an industrial strategy of sorts. We need more direction and coordination from the centre.”

Mr Gregory said greater support for manufacturing at a national level would disproportionately benefit the North, which has a bigger than average manufacturing sector.

It emerged this week that Business Secretary Sajid Javid does not appear to have made any major speeches about manufacturing since taking office.

Mr Gregory said the linking of technology with core manufacturing skills could help increase the amount of reshoring of operations from overseas to the UK.

And he said the Government should look at helping Yorkshire to develop, locate and retain skills in technology. Outperforming UK cities such as Reading have a much higher proportion of jobs in information and communications sectors, he added.

The interview also revealed the pressure on corporates to adapt to the digital age. Mr Gregory said many clients of EY are acquiring technology companies as a way of redesigning their businesses.

EY forecasts that Manchester is set to be the fastest-growing city outside of South over the next three years, thanks in part to dramatic events in 1996.

Mr Gregory said: “Since the IRA bomb, Manchester has been working to build a link between business and local government. It takes time. Manchester is doing well and starting to bear fruit.”

He added that Yorkshire has a solid base on which to grow and a reasonably diversified set of industries, including finance, manufacturing and professional services.

Stuart Watson, EY’s senior partner in Yorkshire, said: “Our report predicts that Yorkshire’s economic growth over the coming years will be steady, supported by a stable property market relative to much of the rest of the UK, and our strong financial and manufacturing sectors in particular.

“However, the forecast also points to a clear growth gap over the next three years betwen the northern regions and those in the South of the country, which are set to benefit from good corporate investment and growth, healthy property markets and strong migration levels.”

The devolved administrations of Scotland, Northern Ireland and Wales will be stuck in the slow lane over the next three years, according to EY.

The UK city and region forecast said they are expected to be hardest hit by Government spending cuts.